As Music Industry bookkeeper Tom Harris explains “bookkeeping can seem like a daunting prospect for any young artist or manager starting out. But the good news is that once you get your head around it and set up some system it’s really pretty simple.”
It’s pretty easy for professionals to think it’s ‘simple’ but really how simple can it be? We chatted with band manager and music bookkeeper about what artists can do to keep track of their music, and stay out of financial trouble.
Both Caleb and Tom will be speaking at this year’s Face The Music Conference which runs on Friday the 14th and Saturday the 15th of November, for more info visit www.facethemusic.org.au.
Tom Harris is the founder and managing director of White Sky, a specialist bookkeeping business that focuses on helping musicians manage their money. Formed by Harris in his bedroom in 2002 with just two bands on the books, now 12 years later White Sky is now the biggest music business management company in Australia; handling the finances for over 200 bands, record labels, festivals and various music businesses.
Caleb Williams is an artist manager at Unified, beginning his music industry career over 15 years ago, Williams was originally a stage tech before making his way into tour managing bands Bodyjar and Birds Of Tokyo and many more. Caleb is now working with The Amity Affliction and Bodyjar in the management team at Unified one of Australia’s most well respected music companies.
Get Set-Up Right From The Start
Tom: The first thing you need to do is to get your business structure set-up correctly from the start. This may be in the form of a Sole Trader, Partnership, Company or a Trust structure.
This includes getting an ABN (Australian Business Number) so you can raise invoices and get paid.
It’s a good idea to engage a good music industry based Tax Agent to advise you on this point. If you’re planning to set up a basic Sole Trader (if there’s only one of you) or Partnership (if there’s a group of you) you can register for an ABN directly via the website www.abr.gov.au
Register Your Business Name
Tom: The next step is to register your business name so you can legally trade under that name as well as open a business bank account. It costs $80 for three years and can be done at this website: www.asic.gov.au/business-names
NOTE: If you’re a Sole Trader and your business name is your actual name, you don’t need to register it.
Open A Business Bank Account
Tom: Once you have your ABN and your Business Name certificate, you can open a business bank account. Think about what banking facilities you might need, such as debit cards, credit cards or cheque books and speak to your bank about how to go about setting them up. It’s really important that you keep your ‘business money’ separate from your ‘personal money’ so you can more easily keep track of it.
Don’t Avoid The Tax Man
Caleb: Never avoid the tax man and make sure you have the correct business structure. Once your band begins to make any kind of money you will need to declare it to the tax department. I know many bands have been caught out not paying tax.
Even if it’s a minimal amount of money you should still declare it or it will catch up with you. Never spend all the money you make, always keep something in reserve for emergency. Best way to do the above would be to get an external person to look after your finances. Business managers or book keepers are a much cheaper alternative than using an accountant for day to day controlling of the business and business finances.
Keep your Business Money Separate From Your Personal Money
Tom: Now that you have your business bank account make sure you use it as often as possible and keep as many of your business transactions running through your business account as possible. This will make doing your books a lot easier as you’ll have your bank statements to refer to if you’re ever unsure of who or what’s been paid.
Be Careful With Your ‘Business Investments’
Caleb: Spending too much money on merchandise and production at the beginning is a common mistake, it’s worth spending more money on rehearsal rooms to make sure you have the songs and can play well together before you spend money on anything else.
Lots of bands spend loads of money printing merchandise putting themselves in debt, ending up with a pile of shirts they can’t sell. Make sure you have the basics down before you invest too much money into the band.
Keep Receipts for Everything
Tom: This is the classic bookkeeper catch-cry and it’s as true today as it ever was. The good news is, modern technology is making this job easier. As long as your images are totally clear, it’s fine to just keep a scan or digital photo of your receipts. There are Smart Phone apps that enable you to upload them to a cloud drive or direct to your accounting software.
Don’t Pay Anyone Without an Invoice
Tom: It’s a good habit to remember to always make sure you have an invoice before you pay any crew or contractors. It’s a lot easier to ask for the invoice before you’ve paid them rather than chase them up later.
Keep on Top of it Regularly
Tom: It’s great to set up processes and systems, but if you don’t stay on top of things regularly things can quickly fall behind and become a headache. Try to look at your spreadsheets, check your bank accounts and file your receipts and invoices at least weekly.
Centralise the Control of the Money
Tom: If you’re a band, or a group of any kind, it’s a good idea to place one person in charge of all the money stuff. This makes it easier for everyone.
When Budgeting For A Recording Get Quotes
Caleb: There’s many different stages you need to budget money for when you are looking to record. Pre Production, Tracking (recording) the album, mixing, mastering, pressing and marketing. Pre production can be the most important and cheapest part of this process. Making sure you know the songs and knowing how to play each part as close to perfect as possible will save you money when you enter the studio. This can be done in a rehearsal room or at home so can be very cheap.
The most expensive part will be for the studio time and to pay the engineer/producer – this will take up about 40% of the money. You need to make sure you have enough left in the budget for the mastering and pressing. The next important thing step to a great release of a sounding recording is people knowing that you’re releasing something, you need to make sure there’s money to market the release. Make sure you get quotes on all these costs before you start recording and adjust your budget accordingly.
Keep It Simple
Tom: Setting up great systems and processes is the backbone of all good bookkeeping, but be careful not to over complicate your systems; just remember the basic principle that it’s just about keeping track of income and expenses. Your business manager or accountant can deal with the complicated stuff as long as you’ve kept a record of what income you’ve received and what money you’ve paid out.
Be Realistic About How Much You’ll Earn
Caleb: There is always an element of luck into getting the popularity to make an income out of playing in a band or as a solo artist, there is also a lot of hard work that goes into it. Managing your finances in the music industry is as important if not more important than other industries. There can be so many different sources of income like touring, merchandise, royalties, APRA, PPCA and record sales. If you are a solo artist or play in a band it can take a long time to get to a stage where you can realistically pay yourself a wage from your music. Once you get to that stage I would recommend getting a good manager, book keeper and accountant; having trusted people in these roles could often be the difference between sustaining an income or throwing all your money away.
Tom’s Guide To What You Can Claim:
Live Performance Expenses:
- Management and Agent Commissions
- Production costs; equipment hire etc.
- Crew; sound engineers, merch sellers, etc.
- Advertising costs; poster distribution, poster printing, street press, facebook ads, etc.
- Travel costs; airfares, accommodation, car hire, petrol, taxis etc.
- Travel meals (when you’re not in your home city)
- Marketing costs; photography, artwork design, advertisements, etc.
- Publicist fees
- Website hosting, maintenance & development costs
- Rehearsal Space costs
- Motor Vehicle – note: you will need to complete a log book to calculate what percentage of your motor vehicle costs are business related
- Merchandise costs; design, manufacture, freight, online shop fees etc.
- Recording costs; studio hire, studio equipment, producer & engineer fees etc.
- Musical equipment purchases
- Equipment supplies; picks, leads, cases etc.
- Costumes – note: must be specifically for performance not just every day wear
- Reference material; books and magazines on music or business, iTunes, CDs etc.
- Professional fees; bookkeeper, accountant, lawyer
- Business Insurances; public liability, travel insurance, equipment insurance etc.
- Charity Donations; must be a registered charity
- Industry Membership fees; Music Victoria, AAM, AIR etc.
- Stationery & Postage
- Mobile phone – note: you’ll need to work out a percentage of business use
- Internet costs – note: you’ll need to work out a percentage of business use
- Home office; electricity, gas, rent, etc. – note: you’ll need to work out a percentage of business use
- Computer equipment – note: you’ll need to work out a percentage of business use